Replies to post #8705 on Your Economy (No Politics) (YE1)

[brant_point]

Thanks Bullwinkle.

I don't think I have been this sad about America since Nixon.
August 9, 1974 may come again. Disgrace, resignation or impeachemnt. Throw the bum out!!

[Bullwinkle]

~:~Market Trend Update for the Week Ahead~:~



OVERVIEW:
It’s that time once again to review the past week and look into the next. This week was much like the last where news was the driver of market activity. The markets seem to have found the new Fed Chair Bernanke enlightening as market response was fairly favorable. I for one see a minimal change; same mandate, different practitioner… As mentioned in the last update with which this post replies: Wall St. sits on the edge of its seat waiting to hear what comes from the mouth of the new Fed chairman. The markets are predisposed to do whatever they will do, but all Bernanke has to do is fart and the markets will most likely rally. That seems to have been the case. All of the hubbub seems more like a wishful thinking scenario playing out its hand. Nothing has really changed, so I suppose that meets expectations and therefore a rally ensued. The DJIA remained the strongest of the majors closing the week out at a new high of 11115 with the Transports confirming the move and setting a new high of its own at 4404. The SPX closed out the week at 1287, the COMP at 2282 and R2k at 730 -- all of which have yet to follow suit with new highs of their own. Maybe it is just me, but this move felt rather contrived. In what was a very good week for the majors, it had a lackluster feel to it. Maybe Ops Expiry had something to do with it, but breadth seemed to be lagging and the A/D line and Up/Down volume once again did not correlate with the new Hi/Lo’s. By Friday some steam came out of the run as Ops Expiry ran its course although the index proxies QQQQ, SPY and DIA managed to surpass their MaxPain levels. Economically speaking there was nothing here to get excited about; Mortgage Apps fell, Housing Inventories continue to rise, Import Pricing jumped, Business Inventories rose, Industrial Production fell, PPI showed a tick up in inflation and Mich Sentiment slipped. The only real bright spot was that of Retail Sales which posted stronger than anticipated gains.

The CoT data shows much the same as open interest continues to trend higher, but remains rather flat at this point. Commercial Short interest on the majors are holding steady. Gold open interest remains above the centerline and trending sideways with Commercial Shorts lining up against Large Spec Longs. Oil open interest has come down a bit off of its spike with some Commercial Longs being established. You can go here to view the CoT data graphs #msg-9171642 -- Equity Fund flows as detailed by AMG Data Services reported Equity funds (xETF’s) net cash inflows totaled $1.596B in the week ended February 15, with $1.421 billion (89%) going to Non-domestic funds. International funds (xETF’s) reported net inflows totaling $1.298B as net inflows are reported to all Emerging and Developed regions. Excluding ETF activity and for the first time on record, more than 700 International Equity fund share classes reported net inflows for seven consecutive weeks. Money Market funds reported net outflows of -$1.105B, as Taxable MM funds reported net outflows of -$2.116B and Tax Exempt MM funds report net inflows of $1.011B. The full report can be viewed at #msg-9780599 -- As for Oil, Gold and the U$D, we saw some extreme volatility in Oil and Gold, with Oil finishing at roughly $61bbl and Gold finishing out at $552 (both nearly ending where they started). The U$D continued to hold its own and closed the week basically where it started at 90.50… The CRB, which has been getting trounced as of late appears to have found a bottom at 320 which coincides with the 200DMA and previous corrections. Treasury yields are inverting with 2yrs@4.65%, 5yrs@4.54%, 10yrs@4.53%, 20yrs@4.52% and 30yrs@4.50%. The Yield Curve can be viewed at #msg-9780690 …


ECONOMIC #’s:
Some hella miserable econ data this week, but it did not seem to phase the markets.

I apologize for being too lazy to post the econ data this week. If you would like to follow up on all of the econ data from the past week just go to the Your Economy thread #board-1948 or you can follow the link provided.

Just scroll down to “This week’s economic reports” and click on the numbers that interest you:
http://news.goldseek.com/GoldSeeker/1140411600.php

Some numbers you will not find at the GoldSeeker link:
MBA Mortgage App data is here #msg-9739465
Oil Inventories data is here #msg-9739414

ECONOMIC CALENDAR For The Week Ahead: http://biz.yahoo.com/c/ec/200608.html


It is really a shame that the unrest in Nigeria (whose oil exports which are so important to us) has taken so long to get the attention of the U.S. mainstream. Nigeria is Africa's leading oil exporter and the 5th-biggest source of U.S. oil imports. The country produces about 2.5 million barrels a day. But violence, hostage taking and sabotage of oil operations have been common in the Niger delta and ongoing for the past 15 years amid demands by the region's impoverished communities for a greater share of the oil revenue flowing from their land. So why did it finally become headline news this past week? Because the oil markets are already nervous about tension between the West and Iran. What I find really ironic is that as long as it doesn’t take place in our backyard it is of no concern, but now because of extenuating circumstances it is. I am in no way advocating this kind of behavior, but still I cannot help and wonder why a situation that can be mediated has to reach an apex and bite us in the ass before we finally pay any attention to it. This type of escalation should be important to us, not just when it becomes an inconvenience… For a country that promotes peace, we seem to have forgotten just how to do go about doing that. Here is a story dating back to 1998 and it sounds very similar to the most recent incident. http://www.expressindia.com/fe/daily/19981010/28355154.html

What would this week be without another scandal? This administration was born on a scandal and has been mired in them ever since. So why would last week’s incident with the VP Cheney being involved in a shooting accident be any different? Sure, he’s mysterious, he holds his cards close to the vest, etc, etc. But we are talking about an accident, not an intentional shooting. So why was it handled so poorly? Because there most likely is more to the story than meets the eye. Here’s my theory: You and I are out shooting and I catch you with some buckshot, not on purpose, but because I am drunk. That’s right, we had a few too many and I screwed up. Now the sheriff’s office wants to talk to me about it, but I tell my secret service to keep everyone away until I can sober up. After 12-24hrs has passed the alcohol will be out of my system and nobody will know. If I am interviewed and it is determined that I am inebriated I will be going to jail. Now being a VP, how will that look in the papers? Not pretty, that’s for sure… So now you know why the secret service kept sheriff’s away, 24hrs passed before it became known and was issued to the press by a civilian and not the White House. The mysterious theme and all the flack are much better than sitting in a jail cell with all of the fallout to follow. So there you have it, pretty simple eh? And yet another abuse of power is added to the ever-growing list…

Soft landing, hard landing, what’s the difference? The housing market is under pressure and will remain so for the unforeseeable future. This is not good on so many levels. To name a few; the rotating ATM will be slowing, an inventory glut is on the way, prices are coming down, sales are slowing, unemployment will rise once new construction commitments are met, interest rates continue to rise for mortgage payments and defaults will rise for those in risky no money down loans. So does it matter if it happens quickly or slowly? Not really, the only real benefit is it allows time to find another way for the powers that be to replace the refinance teller machine. Once consumer spending begins to drag, so will the economy. The consumer is key because 70% of GDP is based on consumer spending, which is supported by borrowing. As borrowing dries up so will consumer spending and this will be the space to watch for the effects to ripple throughout the economy. January retail sales were very good, but now that Christmas is behind us and the gift card effect has been played out for January, it will be interesting to see if retailers continue to slash prices, if auto makers continue to give rebates and if home builders offer more incentives to keep enticing the consumer to spend. I am sure you have noticed as well as I that people are use to getting deals. I for one only make purchases when necessary. I like the finer things in life as much as the next person, but will hold out for the very best deal. No good deals, no purchases. Plain and simple…

Last but not least, let’s spend a little time on the new Fed Chair B-2 Bernanke and the fate of economic policy. I call him B-2 because a helicopter will not suffice for the amount of money this guy will be dropping. American economic policy has a profound effect on the global economy as a whole. This is most likely why M3 will no longer be published, because the amounts of money to be printed and introduced into the system will be staggering and freak out the markets here and abroad. You want to talk about shock and awe? Our fate is sealed, much like the melting glaciers. Even if the world were to stop using fossil fuels today, the global warming will still continue and melt the glaciers anyway, it is irreversible. I see quite a correlation here between the global economy and global warming. It makes no difference who it is that heads the Fed, the agenda has been carved in stone and the inevitable date with fate will some day be realized. As for clarity in Fed-Speak, sure Bernanke speaks more clearly, but he is cut from the same cloth as that of his predecessor. We are being led to believe that the Fed has no clue, but they know exactly what it is that they are doing. Just as the wealth effect got to be too much during the tech bubble era, so will be a repeat in the housing bubble era. The bottom line here is nothing has changed and denial is not a river in Africa…

So You Really Think Things Are Different This Time?


WHAT CAN WE EXPECT NOW?:
Well our new Fed intro meeting came and went as did Ops Expiry and a Bradley turn remains in the balance. Whether or not the Bradley has an effect is yet to be seen, but we will soon see. As with most Bradley’s they come and go and are fairly accurate, but do not seem to stick for any particular length of time. This may be due to many reasons, but the single biggest cause for their inability to stick could be the PPT. Either way, it’s not really important and just a theory. Another theory of mine and as mentioned on occasion is that when we have a slow econ data week, the market bias tends to be to the downside. Inversely, the more data that is reported the bias moves toward the upside. It does not seem to matter what the data is or how good or bad the data presented is, just the fact that the market seems to move on the more or less data thesis. Since the coming week will see very little econ data reported, I will be taking note as to how the week goes. So let’s see if there is a trend there or if it is just my imagination 8^) Also of note is the poor econ data that we were presented with and was virtually ignored. This data may sink in after it is fully digested over the long weekend. Another issue of note is that we just came off a fairly strong Ops Expiry, DJIA is Overbought and the SPX is close to being the same. Can the DJIA continue higher and does it have the wherewithal to pull up the other indices with it moving them into new highs? We have seen the COMP perform this feat, but I am at a loss as to when the last time the DJIA has done this. Then we see divergences galore and without going into all of them, there are many. Some of the most notable can be seen in the annotated charts for which I provided a link below. Some other divergences that jump out are the BPCOMP vs BPNDX, the McClellan vs Summation, Hi/Lo vs Adv/Dec and Up/Down volume, etc. These issues coupled with the short week, the unsettling exuberance over nothing and items mentioned above lead me to believe that we are setting up for a down week. The bullish side of the coin shows us that in those very same annotated charts I mentioned lies formations of a bullish nature such as pennants and flags. This alone may be enough for us to move higher in the week to come, but I cannot tell you how many times I have seen bullish and bearish patterns fail. The bottom line is it’s a crapshoot, expect the unexpected, but I will be looking for down in the coming week…

As for the U$D, Gold and Oil – My outlook is somewhat different than that of the majors. The U$D has continued to hold the 90 area, but I believe resistance in the 90 area has been to strong and am now looking for dollar weakness in the weeks ahead. Gold may base a little longer in the $540-$550 area but I believe a big move is coming soon. Not only in Gold, but Silver and commodities in general. The CRB has tested its 200DMA, this has been support in the past and the area for which strong moves originate. Oil and energy have taken a hit lately and I felt that last week’s cold snap coupled with a pick up in Iran rhetoric would support the sector. Well Iran rhetoric was absent and nobody paid much attention to the weather and we went lower. That change soon if not this week as another cold front across the better part of the US has taken hold. What’s more is that Oil is testing its 200DMA and much like the CRB, this too has been support and led to nice moves off of corrective phases. I am very bullish on Gold, Oil and commodities in general for the weeks ahead. A buying opp has been presented and I believe it will be taken advantage of…

Technically Speaking, the Bullish/Bearish Advisors have yet to be updated, but last week were Bullish 51.6% and Bearish 25.3%. AAII Sentiment as of 2/15 is coming in at Bullish 40.2%, Bearish 35.7% and Neutral 24.1%… The VIX and VXN found support and are oscillating near 12 & 15 respectively. The CBOE EPC Ratio ended the week at .51 and TPC ratio at .83. The RSI 5-Days are Overbought on the DJIA, nearly so on the SPX and Neutral on the COMP. The P/C ratios, VIX/VXN, $NASI Daily (Summation), $NAMO Daily (McClellan), NAHL Daily (Highs/Lows), $NAAD Daily (Advance/Decline), 200DMA stocks and Bullish %'s all can be viewed below along with the major indices…

Some Annotated Charts (my perspective)
GOLD & WTIC #msg-9787954
COMP, SPX & DJIA #msg-9787965

Sentiment and Contrary Opinion Charts #msg-9171686 (service unavailable as of this writing)

































NOTE:

Core: NXG, ENPIX, UJPIX, PRGNX, USPIX, €uro & ¥en

Speculative: DNDN, AGIX

Scalp Trade: N/A

Swing: GSX, GEOI, CUP


Disclaimer:
This disclosure is not a recommendation to buy, sell or do as I do. It is only to give my thoughts on current market conditions and attempt to identify trends and create a track record. I am not a day trader and invest mostly in funds or baskets of stocks, perform occasional swing trades and some scalps. Data presented may not be 100% accurate as I do make mistakes, so please perform your own due diligence.